This article was first published on Stories by MakerDAO on Medium
The Maker Foundation Interim Risk Team will place an Executive Vote proposal into the voting system to enact a new Dai Stability Fee of 3.5%.
The increase to the Stability Fee was discussed in the Governance call on Thursday, February 28. Please review the Video, Audio, Transcript, and the online discussion to inform your position prior to voting.
Key factors under consideration for increasing the Stability Fee are:
- Exchange price persists below $1
- High inventory levels among market makers and prop desks
- No attributable impact from the previous Stability Fee increases
An examination of the available data strongly suggests a Stability Fee increase is warranted. The exchange price of Dai across several major exchanges, such as Coinbase Pro and Bitfinex, has been consistently hovering in the $0.975 to $0.985 range for 1–2 months. Decentralized exchanges with sufficient volume/liquidity, such as Eth2Dai, also confirm the same discrepancy.
Below is an average price chart of the Dai trade history.
Informal discussions with several large Dai market makers have suggested that inventory levels have run high, and balance sheet capacity has diminished. Informal polling through various community channels has also shown strong support for an increase.
Incentivizing CDP closures through a Stability Fee increase (thereby reducing outstanding Dai) is strongly viewed as the appropriate action.
In February, the Stability Fee was increased twice, each time by 0.5%. The impact of this combined 1% increase was negligible, indicating that neither the target Stability Fee nor the incremental change was appropriate....
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